Due to a decline in the dollar index following significant data on the US labor market, the US stock market closed Friday’s trading higher. According to the non-farm statistics, the US economy created 223,000 more jobs than analysts had predicted. The unemployment rate decreased from 3.7% to 3.5%, and average hourly wages decreased from a previously reported reduction of 4.8% to 4.6%. The Fed can anticipate further rate increases in the future to keep inflation under control as long as the US labor market is robust.
A positive US labor market report caused the dollar index to suddenly decline, but this could be a “false” move because a robust labor market is the basis for a stronger dollar combined with more rate hikes. The S&P 500 index (US500) gained 2.28% (+1.72% for the week) as of Friday’s stock market close, while the Dow Jones index (US30) gained 2.13% (+1.54%). The NASDAQ Technology Index (US100) increased 2.56% on Friday, adding to its weekly gain of 1.94%. Last week, all three indices finished in the green.
The non-farm payrolls report and last week’s FOMC report both highlighted that the labor market is still stable and that Fed officials raised the final interest rate range. These two elements suggest that interest rates will rise again in the first half of 2023. A crucial component will be the inflation statistics on January 12.
Due to a severe storm, thousands of homes and businesses lost power in California on Sunday. The NWS Weather Alert issued a warning on Saturday stating that a large portion of central California may experience flooding as a result of the multiple periods of heavy rain that have occurred since late December.
Europe’s stock markets closed Friday mostly higher. The Spanish IBEX 35 (ES35) was up by 1.00% (+4.78% for the week), the German DAX (DE30) increased by 1.20% (+4.41% for the week), the French CAC 40 (FR40) increased by 1.47% (+5.21% for the week), and the British FTSE 100 (UK100) increased by 0.87% (+2.49% for the week).
The Eurozone’s declining energy costs, particularly those for natural gas, contributed to a slower overall inflation rate. On an annualized basis, the overall inflation rate decreased from 10.1% to 9.2%. Additionally, core inflation decreased from 5.1% to 5.0% year over year (excluding the cost of gasoline and food). However, the comprehensive research shows that there are increasing price pressures in non-energy industries, particularly for food. This suggests that the inflation rate is still high. Given that many firms typically modify their prices at the beginning of the year, the following two months will be crucial.
As a result, it’s probable that core inflation will increase more. Retail sales have been falling for a while, consumption is still under pressure, and firms are still raising their prices. Because of its highly hawkish stance, the ECB is expected to maintain its pace of rate increases in February and March at 50 basis points.
Last week, Asian markets saw uneven trading. China’s FTSE China A50 (CHA50) increased by 0.81%, Hong Kong’s Hang Seng (HK50) finished the week up 4.80%, India’s NIFTY 50 (IND50) declined by 1.34%, and Australia’s S&P/ASX 200 (AU200) finished the week up 1.24%. Japan’s Nikkei 225 (JP225) declined by 0.39%.
The 40-day lunar New Year period known as “Chun Yun” began on Saturday in China. This Lunar New Year public holiday, which starts on January 21 as scheduled, is the first without internal travel limitations since 2020. China will also reopen its border with Hong Kong on Sunday. Over the next 40 days, more than 2 billion travelers are predicted in China, according to the ministry of transportation. Investors anticipate that the reopening will gradually help the economy recover. In the end, it probably will have an effect on oil prices. After the Lunar New Year, China often experiences an increase in its demand for oil. The rise in demand is a hint that oil prices will rise.
The highest advances in the commodities market last week were seen in the futures for copper (+2.97%), cotton (+2.76%), gold (+2.43%), and platinum (+1.99%). The largest decreases were seen in the futures for natural gas (-15.96%), gasoline (-9.05%), Brent oil (8.51%), WTI oil (8.14%), wheat (6.19%), sugar (5.34%), coffee (5.29%), corn (3.72%), and timber (2.95%).
S&P 500 (F) (US500) 3,895.08 +66.02 (+1.72%)
Dow Jones (US30) 33,630.61 +509.00 (+1.54%)
DAX (DE40) 14,610.02 +173.71 (+1.20%)
FTSE 100 (UK100) 7,699.49 +66.04 (+0.87%)
USD Index 103.91 -1.13 (-1.08%)